Journal article

Comparing the Effectiveness of Employment Subsidies

Publication Details
Author(s): Merkl C, Brown AJG, Snower D
Publisher: Elsevier
Publication year: 2011
Volume: 18
Journal issue: 2
Pages range: 169-179
ISSN: 0927-5371
Language: English


This paper examines the implications of different types of employment subsidies for employment, welfare, and inequality. It investigates how these effects depend on what target groups the subsidies address. Our analysis focuses on policies that are “approximately welfare efficient” (AWE), i.e. policies that (a) improve employment and welfare, (b) do not raise earnings inequality and (c) are self-financing. We construct a microfounded, dynamic model of hiring and separations and calibrate it with German data. The calibration shows that hiring vouchers can be AWE, while low-wage subsidies are not AWE. Furthermore, hiring vouchers targeted at the long-term unemployed are more effective than those targeted at low-ability workers.

Focus Area of Individual Faculties

How to cite
APA: Merkl, C., Brown, A.J.G., & Snower, D. (2011). Comparing the Effectiveness of Employment Subsidies. Labour Economics, 18(2), 169-179.

MLA: Merkl, Christian, Alessio J. G. Brown, and Dennis Snower. "Comparing the Effectiveness of Employment Subsidies." Labour Economics 18.2 (2011): 169-179.

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